Retailers Supposedly Banned For Food Stamp Trafficking Still Redeemed Over $65 Million From The Program

Retailers who have been banned by the Food and Nutrition Service (FNS) for food stamp trafficking are still redeeming more than $65 million in benefits from the program, a new report by the U.S. Department of Agriculture inspector general (IG) found.

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The report sheds light on fraud within the Supplemental Nutrition Assistance Program (SNAP), with the IG concluding the integrity of the program is “at risk.”

“The Office of Inspector General (OIG) found that the Food and Nutrition Service (FNS) does not have clear procedures and guidance to carry out key oversight and enforcement activities to address SNAP retailer fraud, or adequate authority to prevent multiple instances of fraud—either by a particular owner or within a particular location,” the Aug. 20 audit report states.

“As a result, the integrity of SNAP is at risk because FNS does not consistently provide deterrents for trafficking,” the IG said. SNAP “trafficking” means exchanging food stamp benefits for cash.

As record numbers of Americans are on food stamps (47,635,297 as of May 2013), the number of authorized retailers has also increased dramatically. A total of 246,565 stores participated in 2012, a 40 percent increase since 2007. With more retailers comes a greater opportunity for fraud.

The audit found that the “FNS currently allows 585 multi-unit retail store owners to continue redeeming SNAP benefits at other locations after being permanently disqualified for trafficking in one location.”

As a result, the banned retailers redeemed $65.3 million in benefits in fiscal year 2012.

Of the 585 prohibited retailers, 66 were “permanently disqualified owners” who started businesses at new locations, redeeming $11 million in benefits.

Thirty-nine were classified as owners who were directly involved in trafficking and banned in the agency’s own database, which manages approval for retailers to participate in the program.

Retailers can be permanently banned from participating in SNAP if an owner or employee is found to be exchanging food stamp benefits for cash, trafficking in firearms or drugs, or for three total violations.

The IG listed the $65.3 million as “questioned costs.” The FNS disputed this, saying, “There is no indication that the [585] retailers noted in this finding are committing fraud.”

The revelation that the program is giving millions to known food stamp traffickers comes on top of a release last week by the USDA, which found that the practice was at a record high of $858 million in 2011.

The number of Americans redeeming their food stamps for cash was up 30 percent from 2008 to 2011.